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Nov. 24th, 2008
I read the whole Citicorp post-mortem in the Sunday NYT this morning.
Their risk management guy makes less money than, and is the butt boy of, the traders and their bosses. He'd wait outside the office of one of them for as long as 45 minutes so they could ride home to Short Hairs together. Also at fault, a slavish devotion to the incredibly sanguine, not to say totally off-base, credit rating agencies who declared the Rubin/CitiCorp mortgage bundles (CDOs?) had a .01 per cent chance of defaulting.
To this arrangement, the very proactive Citicorp board member Rubin lent his authority and indeed the legislation whereby the instruments were created and deregulated.
It's also striking me, in trying to follow the pea under the various walnut shells, that the government is giving money to people without asking to see their books -- thus, instead of loaning more, the banks stash the handout and loan less. It appears to me, can this be correct? that the money they were using to lend to consumers was the cash investors were pouring into the CDOs, and that since investors have stopped investing in CDOs, banks won't lend to consumers but yet have capital with which to do so. Can this be right?
And, who would be the sources for this stuff? Federal Reserve examiners? (In addition to the former employees....)
Their risk management guy makes less money than, and is the butt boy of, the traders and their bosses. He'd wait outside the office of one of them for as long as 45 minutes so they could ride home to Short Hairs together. Also at fault, a slavish devotion to the incredibly sanguine, not to say totally off-base, credit rating agencies who declared the Rubin/CitiCorp mortgage bundles (CDOs?) had a .01 per cent chance of defaulting.
To this arrangement, the very proactive Citicorp board member Rubin lent his authority and indeed the legislation whereby the instruments were created and deregulated.
It's also striking me, in trying to follow the pea under the various walnut shells, that the government is giving money to people without asking to see their books -- thus, instead of loaning more, the banks stash the handout and loan less. It appears to me, can this be correct? that the money they were using to lend to consumers was the cash investors were pouring into the CDOs, and that since investors have stopped investing in CDOs, banks won't lend to consumers but yet have capital with which to do so. Can this be right?
And, who would be the sources for this stuff? Federal Reserve examiners? (In addition to the former employees....)